Six-month unfair dismissal rights: are fixed-term contracts still appropriate?

Following on from our ‘1 July 2026 - The Hidden Milestone’ blog, we set out a reminder of the upcoming reduction of the qualifying period for unfair dismissal rights from 2 years to 6 months. From 1 January 2027, your employees will only need 6 months’ continuous service before they gain the right to make an unfair dismissal claim. This will apply to anyone employed on that date, not just new starters from that point. Essentially:-

• anyone employed on or before 1 July 2026 will gain the protection on 1 January 2027; and

• anyone employed after 1 July 2026 will gain the protection when they reach 6 months’ service.

While much of the discussion has focused on permanent employees, employers who rely on fixed-term contracts may find themselves particularly affected by this change.

Why?

The non-renewal of a fixed-term contract is treated, in the eyes of the law, as a dismissal. 

Reasons for fixed term contracts

Fixed term contracts are commonly used for:

• Maternity cover

• One-off projects

• Temporary increases in workload

• Seasonal business demands

• Grant-funded or externally funded positions

Fixed-term contracts are typically shorter than two years in duration and therefore the more generous two-year qualifying period has historically meant the expiration of the fixed-term wasn’t a problem; it did not give rise to unfair dismissal protection unless the contract was for two years or more. 

However, once the six-month qualifying period applies, employees on fixed term contracts of 6-24 months’ duration have a new right, and may challenge the non-renewal of their contracts as unfair dismissal.

What does this mean in practice? 

Employers who routinely use fixed-term contracts should review their existing internal procedures to ensure that contract expirations are managed with the same care as other dismissals.

Employers who try to circumvent the six-month qualifying period and advertise very short, fixed-term contracts, e.g. 3 months, may struggle to recruit high-quality candidates. Such candidates are likely hold out for longer contracts or more stable positions. Employers may need to balance the duration with the aim of their fixed term contracts. 

Whilst this a massive shift in employee rights and will require employers to act faster, employers will not be obliged to renew the fixed term if they can show that:

• the principal reason for the dismissal fits into one of the potentially fair statutory categories (capability, conduct, redundancy, illegality or some other substantial reason (SOSR)); and

• a fair procedure was followed.

What should employers be doing?

Usually, there is a potentially fair reason for the non-renewal. The key issue is therefore likely to be the employer’s process.

Employers should therefore:

• Clearly record when their fixed-term contracts are due to end and continue to monitor these, if they aren’t already;

• Be proactive in managing fixed-term contracts towards the end of their term, ensuring that the non-renewal is managed fairly;

• Ensure that managers have received up-to-date training on internal dismissal policies and processes; and

• Maintain written records of decisions not to renew fixed term contracts and how this was implemented. 

If you’re wondering how to best offer fixed-term contracts moving forward or whether they are appropriate for your business, speak to our Employment Team today.